Week of April 8, 2019

Quote of the Week

Meanwhile, over the past 10 years, low interest rates meant that we kept bringing tomorrow’s growth forward to today. Unfortunately, we may now have run out of tomorrow’s growth, and are about to start  to regret eating today’s growth yesterday.” – Louis-Vincent Gave, Gavekal Research

Technical Corner  

“We are all used to using the word “cycle”. We’re all used to looking at historical charts and graphs and equations and relationships. The reality is that maybe the word “cycle” is no longer even relevant, given that we have so much unconventional central bank involvement.”  -A Wall Street strategist in this weekend’s Barron’s cover story

In case you missed it, Barron’s ran a rather interesting cover story this past weekend “Is the Bull Unstoppable?” In it, a Wall Street strategist questioned the very existence/nature of economic cycles.

While the sub-headline for that story (“the decade long rally could continue for years, the optimists say”) was deeply questionable, it was the quote above that really stuck out to me. The gist of his argument boiled down to the old Wall Street staple…”this time is different”.

I completely disagree.

Sure, it is true every cycle is different. But the key is all about measuring and mapping the changes within each cycle.

It is clearly evident that the rest of the globe is in a recession and it looks like it might spread to the U.S. The Central Banks around the world are running out of ammunition to grow their economies through interest rate cuts and quantitate easing.

The first quarter Gross Domestic Product (GDP) is coming out soon. If it is down as I expect, we could be moving in the same direction as the rest of the world.

On the portfolio front, we are adding some new asset classes. We will be adding Energy, Real Estate Investment Trusts {REIT’s), precious metals, and Utilities to most portfolios.

Name Wkly %Chg YTD %Chg 12-mo %Chg
Dow Jones Industrials  +1.17 +13.28 +10.41
Nasdaq Composite  +2.74 +19.64 +4.80
S&P 500  +2.06 +15.39 +11.07
MSCI EAFE*  +1.84 +11.05
10-yr Treasury Yield +0.09 – 0.19
*5-day performance ending Friday

 Sue’s Thoughts

I have travel on my mind again. Why?  As you read this newsletter, I am completing a visit with my second grandchild in celebration of her first birthday.  She lives in Japan; therefore, I am compelled to keep up with travel rules.  I wrote about this topic a year ago when I received my REAL ID. As we near the deadline, a year from October, I keep reminding my husband to update his license.  The following article ran on February 28, 2019.

Why Real ID is Causing Real Confusion  By Christina Ianzito, AARP

In just 19 months air travelers will need the driver’s license/ID card known as a Real ID if they want to board domestic flights, but as states roll out the new cards there has been both confusion and anxiety.

Oct. 1, 2020, is the day the Real ID law will finally be enforced. Conceived as part of 2005 legislation in the wake of the 9/11 terrorist attacks, it requires people to show security-enhanced IDs to pass through airport security checkpoints or to enter certain federal facilities, such as military bases. (You will also be able to use passports or certain other federal documents as an alternative to a Real ID.)

Sometimes called the Star Card, because most states are marking their Real ID cards with a gold or black star in the top right corner, it also must include an encoded “machine readable zone,” like a passport’s, with a person’s scannable information. Many state driver’s licenses already have this feature. The key thing that makes the card “special,” is that the federal government requires you to provide certain identifying documentation to obtain one from your state.

The rollout has caused confusion for various reasons, so here are a few basics that are helpful to understand:

  • To get a Real ID, you need to present documents to your motor vehicle department proving your age and identity, Social Security number and address. That generally means bringing a birth certificate or passport, a Social Security card or tax form such as a W-2, and two proofs of address. If you’ve changed your name through marriage, you’ll need a marriage certificate.
  • Although the Real ID is also a driver’s license, the old-style driver’s license is still lawful for driving and still available as an option in many states. (Some, such as Arizona and Kentucky, are trying to make this clear by calling the Real ID a “Voluntary Traveler ID.”)
  • To fly, however, a “regular” driver’s license won’t be sufficient to get through security and onto a plane. The Real ID technically is not mandatory because you can instead use a passport or an ID from the federal government’s Trusted Traveler Program, such as a Global Entry card.
  • For international travel, you’ll still need a passport.

That all may sound simple enough, but in much of the country, nearly 15 years after its conception, Real ID remains a work in progress — and difficult for some residents trying to get a new card.

Twelve states have yet to issue them, but are working on it (Tennessee, for instance, plans to have them ready in July). Other states, and Washington, D.C., have been issuing Real ID cards for several years now with little fanfare; and still others recently began issuing them, but the process has been fraught with confusion. You can check your state’s status on the U.S. Department of Homeland Security’s site, which has a color-coded clickable map.

Privacy Concerns

Many states have delayed getting the cards in circulation because some residents and legislators worried that Real ID was a way for the government to collect personal information for a national database. State lawmakers in Idaho, Oklahoma, Kentucky and elsewhere even passed laws banning their motor vehicle departments from implementing the new federal requirements and now are playing catch up to meet the upcoming deadline (which was meant to be Jan. 22, 2018, but delayed with all the foot-dragging).

Because Oregon didn’t agree to comply with the Real ID requirements until 2017, for instance, the state won’t be ready to issue the optional new cards until July 2020.

In Kentucky, privacy concerns were initially an issue, says Naitore Djigbenou, director of public affairs for the Kentucky Transportation Cabinet. But, she adds, “We’ve communicated to people that this is a state-maintained card. There’s no national database or anything.” Kentucky, which will still offer old-style driver’s licenses, will start issuing optional Real IDs in certain counties at the end of March, Djigbenou says, then will expand statewide in phases over the following few months.

The DHS website stresses, “Real ID is a national set of standards, not a national identification card,” and each jurisdiction “maintains its own records, and controls who gets access to those records and under what circumstances.”

Paperwork Problems 

For some people, getting the proper paperwork is a problem because their birth or marriage certificate isn’t actually from the state and therefore not sufficient. In Maryland residents who are 65 or older are allowed to submit other documents in place of a birth certificate, including military discharge paperwork, says Christine Nizer, administrator of Maryland’s Motor Vehicle Administration: “We wanted to provide alternatives to make the process as easy as possible.” The state has an online document guide to help residents figure out what’s needed.

Getting the Word Out

Many people remain unaware of, or are simply confused by, the new rules, and the clock is ticking. Idaho made the card available a year ago, but officials reported a few weeks ago that only 5 percent of licensed drivers, or 70,000 people, had applied for one so far.

The Department of Homeland Security has called on travel agents to begin asking their customers whether they’re Real ID compliant, and is stepping up its public education campaign.

“There is still some time,”  says Alexis Campbell, spokesperson for Pennsylvania’s Department of Transportation, “but it’s good to be proactive.”

Ianzito, Christina AARP. “Why Real ID is Causing Real Confusion.” https://www.aarp.org/travel/travel-tips/transportation/info-2019/real-id-guide.html?cmp=EMC-DSO-NLC-TRVL-TRAVEL–MCTRL-031919-F1F-3645681&ET_CID=3645681&ET_RID=3808217&mi_u=3808217&mi_ecmp=20190319_Travel_M_CTRL_Winner_654201_963303&encparam=Rs0YeToNVnnoR96sp8%2f7MSWm8enfjAUggP%2bFDuk5Lgo%3d Accessed 25 March 2019.

By the Numbers

JUST A GAME – 252 players (out of 750) on the opening day rosters of major league baseball teams, i.e., 34% of all ballplayers, have salaries of at least $5 million for the 2019 season. That’s equal to $30,864 per game for each of the scheduled 162 games to be played during the regular season which runs to 9/29/19 (source: MLB). Michael A. Higley, BTN 04-08-2019

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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.



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